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Wednesday, 23 December 2015

A few macro thoughts today

A few macro thoughts today...certainly the newsflow is getting a little thinner. Still a number of noteworthy stories however.

Greece - The Board of Directors of the European
Stability Mechanism (ESM) yesterday authorised the disbursement of €1 billion
to Greece. This disbursement, which follows the Greek government’s completion
of the second set of reform milestones, will be used apparently by the government for debt
service, budget financing, and co-financing projects funded by EU structural
funds. Further structural reform discussions to continue into 2016
including the critical pension reforms of course... The size of the continuing challenge shown by this chart from today's FT:

Russia / Ukraine – Russian parliament voted to
suspend its free trade zone with the Ukraine from the start of January.
Bilateral trade has fallen from $50bn in 2011 to $12.5 in the first 10 months
of this year. Relations getting worse again…and they still haven't sorted out the outstanding bond issues.

China tests longer onshore yuan trading hours. The
Chinese Foreign Exchange Trade System will close at 11:30pm instead of 4:30pm
local time. The trial, which lasts through Dec. 30, will allow China to overlap
with European markets and potentially boost its case for the yuan as a global
reserve currency (via qz.com). The latter point feels important to me. In other China news today famine/feast news today:

Other China news: China Regulator Halts P/E Arms Of 17 Banks
– Caixin

China May Speed Up IPO Issuance Next Year -- Sec. Journal

A bit of a two-way pull there but one clear trend is that strikes are up! Job insecurity talking...

Still the Chinese market overall did perform better than the
world index…

Talking about broader markets – it really is all about the US dollar:
S&P futures have rallied for 2 days in a row adding 2.0%, making this
strongest start to a week since 3 February 2015, 46 weeks ago. Funny how
this happened after the 1.30 cent (+1.2%) rally seen in EUR/USD over Monday and
Tuesday marks the strongest start to a week for 28 weeks (stats via Predicted
Markets).

Staying with the US indices, will the US index end positive for the seventh year in a
row? 5 years of commodity losses however...

(h/t @MktOutperform)

Re commodity prices, Oil noteworthy over the last 24 hours. U.S. crude prices briefly rose to a
premium over internationally traded Brent on Wednesday following a report of a
surprise dip in U.S. inventories and the potential for more exports in an oil
market which still suffers from ballooning oversupply. Unusual over
recent years.

Watch out for the 2016 OPEC report out later.

Back to markets, the current post-2008/09 crisis, 82-month
S&P 500 rally, is set to be the second-longest bull market in history in
2016.

(h/t @vexmex)

But still an unusual world? Absolutely. Great chart citing the pre global financial crisis boom and bust as well as QE inspired 'recovery' via @Mick_Peel: